Gold and Diamonds - Amendment to Tax Treatment of Making Service (VATP032)
This public clarification, VATP032 replaces Public Clarification VATP029 published in June 2022. Based on the Cabinet decision No. 25, the definition of goods has been amended to state that it may include Making Services directly in connection with the Gold.
However, from 1 January 2023, the application of the reverse charge mechanism will be restricted to the supply of Gold and any products where the principal component consists of Gold.
If the supplier charges a single price for the Gold Item, including the Making Service, the supply will be regarded as a single composite supply of the Gold Item if all the following conditions are met:
1. The supply consists of a principal component (Gold Item) and ancillary/incidental elements, e.g. related services (including the Making Service from 1 January 2023), or these components are so closely linked that they constitute a single supply which would be impossible or unnatural to split
2. The price for the Gold Item and the related services is not separated.
3. The Gold Item and the related services are supplied by the same supplier.
If all of the above requirements are met, the supply of the Gold Items (including the related services) would constitute a single composite supply which may qualify for the reverse charge mechanism, if all of the requirements of Cabinet Decision No. 25 are met.
If the supplier charges separately for the Gold Items and for the related services (including the Making Service from 1 January 2023), or where the price of these components are separately reflected, the supplier is regarded as making multiple supplies. In instances of multiple supplies, only the VAT related to the Gold Items may be accounted for under the reverse charge mechanism, provided all the requirements of Cabinet Decision No. 25 are met.
Since the supply of the related services does not fall under the special reverse charge mechanism under Cabinet Decision No. 25 in cases of multiple supplies, the supplier is required to account for VAT on these services if the supplier is a taxable person.
To get more clarity regarding this amendment, please go through below attached Public Clarification issued by the FTA.
